People have been talking for years about wages for early childhood educators. Preschool teachers in Ohio last year made an average of less than half the wage of K-12 teachers. The average preschool teacher’s salary only amounts to 112% of the federal poverty level for a family of four, meaning that many preschool teachers are likely below the poverty line and most are low-income.
This seems counterintuitive given the research available on the returns to early childhood education compared to interventions later in life.
The other side of this conversation, though, is the cost of early childhood education. A recent study by the RAND corporation suggests that high-quality early childhood education education costs anywhere from $3,600 per student to $13,400 per student. This means the average worker in Ohio making $48,000 a year would have to spend 7-28% of income per child on early childhood education.
Labor makes up a considerable portion of the cost of child care, with estimates in the range of 60-80% of total program costs going to teacher salary and benefits. Using the RAND estimates of the cost of high quality early education, we can then estimate that teacher salary and benefits cost anywhere from $2,200 to $10,700 per student.
Using the above Bureau of Labor Statistics data, we can see that kindergarten and elementary school teachers are each paid more than twice as much as preschool teachers. This means that increasing preschool teacher wages to kindergarten or elementary parity would increase teacher salary and benefit costs to $4,000 to $23,000 per student and total costs (assuming equipment, administration, and occupancy costs stay the same) to $6,000 to $26,000 per student per year. This increases the per-child burden of early education to anywhere from 12-53% of the median wage in Ohio.
Data from RAND Corporation and Center for American Progress
The Federal Department of Health and Human Services has previously established seven percent of family income as a benchmark for child care affordability. This means families up to $190,000 in family income (nine times the federal poverty level) could be considered cost burdened by child care under high estimates of the cost of child care. A flat per-child subsidy capping costs per child at seven percent and assuming an average cost of care of $8,500 would extend up to families making $120,000 per year (six times the federal poverty level), while a per-child subsidy aiming to increase teacher wages to elementary school levels would extend to families making up to $230,000 per year (11 times the federal poverty level).
According to the Annie E. Casey Foundation, there were 690,000 children in Ohio age 0-4 in 2018. A subsidy capping the per-child cost of care at seven percent of income would cost an average of about $5,000 per child at current costs and $12,000 per child at a subsidy aiming to increase teacher wages. An age 0-4 subsidy program capping per-child costs at 7% of family income in the state of Ohio would cost about $3.6 billion at current costs and $8.6 billion at costs aiming to increase teacher wages. For reference, the state of Ohio spent $2.5 billion on higher education and $7.5 billion on K-12 education in 2018. This means that a current-costs subsidy to cap per-child expenses at 7% of income would have cost the state more than any other state program besides K-12 education and Medicaid ($16 billion in 2018) and a subsidy program aimed at boosting teacher wages would cost the state more than any program besides Medicaid.
The dilemma of child care public finance is pretty clear: increasing teacher wages drives up the cost of care, which has to be either picked up by families or by the state. From an economic perspective, this makes perfect sense: if the social benefits of early childhood are sufficiently high, we should see underinvestment in the early childhood market without sufficient public sector intervention. States can choose two of the three options between high wages for teachers, low costs for families, and low levels of state spending. Having all three can only occur through outside federal investment financed by either new taxes or further deficit spending.